LCCI: Spending 98% of FG’s Revenue on Debt Service Worrisome

•Advises government to securitise assets to enhance revenue

Dike Onwuamaeze

Worried that the federal government spent 98 per cent of its revenue to service debt between January to May 2021, the Lagos Chamber of Commerce and Industry (LCCI) yesterday advised government to evolve innovative ways of using its idle assets to boost public revenue and foreign exchange inflows.

The LCCI gave the advice in a statement yesterday titled: “Practical Steps for Boosting Revenue and Foreign Exchange Inflows.”

It noted that, “Nigeria’s fiscal and financial challenges have been of concern to several stakeholders as the government has increasingly resorted to debt to finance recurrent and capital obligations in the face of dwindling revenue.”

The statement signed by the Director General of the LCCI, Dr. Chinyere Almona, added: “The country’s debt situation has become worrisome with debt servicing consuming a significant share of the revenue. The debt service to revenue ratio for the period of January to May 2021 stood at about 98 per cent up from 83 per cent recorded in 2020 according to the budget implementation report.”

The chamber, however, clarified that its recommendations did not connote the sale of national assets, “but a mechanism to generate more revenue from the assets without their outright sales. This is a more sustainable way of revenue generation and boosting foreign exchange inflows.”

The LCCI, according to Almona, noted that Nigeria is an asset-rich nation as it owns hundreds of large state-owned companies, valuable parcels of land, and built structures in prime commercial locations that have been grossly under-utilised and contribute too little to the country’s fiscal and financial situation because their market values had not been ascertained.

“There is, therefore, a need for government to take urgent steps to establish the market value of these assets, securitise the corporate assets and commercialise the real estate assets to raise revenue for the government and foreign exchange inflows for the country.

“There is a need to replace existing debt stocks with asset-linked debt to ease the debt servicing burden; attract Greenfield Foreign Direct Investments (FDIs) into publicly-listed state-owned companies and generate new revenue streams from commercialised real estate portfolios,” the LCCI stated.

The chamber proposed to the federal, state and local governments to identify their corporate, physical, intangible and human assets in terms of location, purpose, and usage and record same in a national asset register.

It said: “An asset register that provides detailed information about Nigeria’s assets at national, state, and local government levels must be created.

“Corporate assets should be securitised via public share issuance to raise equities. A typical example is Saudi Aramco’s IPO of 2019 that realised $25.6 billion after the oil firm sold a 1.5 per cent stake to private investors.

“Physical assets such as idle or under-utilised properties could be repurposed and redeveloped for commercialisation to generate revenue. Typical examples are what the United Kingdom has done with its inner-city prisons as well as the United States’ conversion of military bases into great commercial places.

“Intangible assets such as breaking government monopoly in the infrastructure sector like railway, pipelines, power transmission should be liberalised for investors to commit equity funds into these sectors.

“A typical example was the liberalisation of the telecoms sector that incentivised investors to purchase GSM licenses.”

It further proposed massive investment in skill and talent development to increase the pool of the country’s human capital as, “the financialisation of Nigeria’s human assets will boost net foreign income and remittance inflows into the economy. A typical example is how the Philippines is training its doctors, nurses, technicians, to enable them to export their services to foreign countries.”

The LCCI observed that from a valuation standpoint, government assets could be broadly classified into financial and non-financial assets where the financial assets have established market values while non-financial assets would refer to those assets with unknown market values.